This is a blog about the future of digital media law from Laurence Kaye. Laurence runs Laurence Kaye Consulting Limited (click here), bringing insight an clarity to the complexities of the digital world.

October 30, 2017

Brexit and the realpolitik of trade agreements

Hamlet observed “There is a divinity that shapes our ends, rough hew them how you will.”

When it comes to the UK’s choices in a post EU, Brexit world, it isn’t the Divine, but rather existing international agreements, & the politics and power surrounding them, which will define & constrain what the UK can achieve.

This applies to all industries, for goods and services, although the specifics do of course vary.

It is complex! So in the interests of brevity, I will describe the bare outlines of the framework, with apologies to any readers who are international trade law experts. But the main point is this hierarchy of Agreements create the rules to which the UK pre and post Brexit, trades and to which it has to sign up. We can’t re-write the rule book.

So imagine 3 Russian dolls. The smallest represents the UK. The middle one represents Regional Trade Agreements (RTAs) such as the Common Market for a major trading bloc like the EU, or a bi-lateral free trade agreement between 2 countries.The biggest one represents the WTO & its network of agreements for goods (GATTS) & Services (GATS) to which 164 countries parties.

There is a hierarchy between these international agreements.

So RTAs have to conform to certain key principles that the GATTS/ GATS contain. For services, the over-arching principle is non-discrimination, expressed as ‘Most Favoured Nations’ (MFN) & ‘National Treatment’ (NT).

MFN: Each member treats all the other members equally as “most-favoured” trading partners. If a country improves the benefits that it gives to one trading partner, it has to give the same “best” treatment to all the other WTO members so that they all remain “most- favoured”.

NT = Each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers.

Also, WTO Agreements contain certain Specific Commitments for particular business sectors - in Service Schedules in the case of business Services.

There is also a ‘flow down effect’ in this hierarchy of agreements. So the intellectual property provisions in the TRIPS (the Agreement on Trade-Related Aspects of Intellectual Property Rights)’ part of the WTO, contains important provisions on intellectual property which are reflected in RTA’s like the Common Market.

Data protection provisions are contained in these agreements but it is fair to say that, in reality, the EU’s provisions on data protection and e-privacy have a more pervasive influence internationally than treaty provisions.

EU member states are all parties to the WTO Agreements. So why do individual countries want to create bilateral FTA’s and blocs of countries want to create regional FTAs like the the Common Market? As of August 2017, 281 RTAs had been notified to the WTO and are currently in force, of which 140 exclusively cover goods, 140 cover goods and services, and one covers only services.

There are economic, political and other reasons why countries do not rely on WTO agreements. But I think it’s fair to say that an RTA provides greater access to international markets and less friction for x-border trade. That is to say, closer co-operation or greater economic integration between the parties than that available under the WTO. A good example is the THE COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT (CETA) between the EU and Canada signed on 30 October 2016.

Hence the UK’s desire for a comprehensive trade deal. I can point to the degree of harmonisation between EU member states in the e-commerce area e.g. the country of origin principle so that if you set up an online information business in the UK and comply with UK rules for establishing the business, you are deemed to comply with corresponding rules in other member states, thus achieving a ‘one stop’ regulatory approach. Whilst the UK as a WTO member has to apply the MFN principle to businesses from 3rd countries (I.e outside the EU), they do not benefit from the ‘country of origin’ principle.

So when we exit the EU, we will cease to benefit from that deeper integration with other EU member states unless we replace it with a bi-lateral FTA. The more we want an FTA at the end of any Brexit transition period, the more pressure there is on the UK to remain in the position of ‘regulatory alignment’ with the EU which will apply on Brexit Day.

By the same token, we will also cease to benefit from the FTA’s which the EU has negotiated on behalf of EU member states with third countries or blocs, hence Liam Fox’s prospective busy schedule to sign up new FTA’s.

In the absence of FTA’s lies ‘hard Brexit’ and our existing commitments and rights under WTO Agreements.

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